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IHS Column(36)/Belt and Road paves the way for a boom in trade growth
Nicola Good, executive editor
Wednesday, December 13, 2017, 17:31:56 Maritime Press chaser@mpress.co.kr

   
▲ Nicola Good
The number of countries involved is staggering and the scope is enormous. In the words of the Chinese premier, Xi Jinping, China’s Belt and Road initiative is the ‘project of the century.’

With the ‘Road’ referring to the maritime trade routes traced by admiral Zheng He during the Ming dynasty in the 15th century, and the ‘Belt’ referring to the Silk Road through central Asia that flourished during the Han dynasty two millennia ago and the 7th- to 10th-century Tang dynasty, this modern iteration of China’s early expansion to the West underlies Beijing’s determined push to build a China-centered trading network and take on a larger role in global affairs.

Expected to generate USD2.5 trillion in the next decade in additional trade between China and more than 60 countries connected by a sprawling network of roads, railways, air and sea trade links, Belt and Road has the potential to be a game changer for some sectors of the shipping industry.

According to UNCTAD, the major commodities and containerized trade will find support from Belt and Road, along with other transport infrastructure initiatives. In its mid-term outlook, the UN agency forecasts trade growth of 5.6% and 5% between 2017 and 2022 for these two sectors, with world seaborne trade volumes expanding at a compound annual growth rate of 3.2% in the same five-year period.

With 900 projects under negotiation or under way, Belt and Road is expected to boost demand for raw materials and support Chinse exports of machinery and manufactured goods by sea. These will support dry bulk shipments, port development, and the container network, UNCTAD says.

Shipping benefits will also emerge from Belt and Road’s improved connections. The initiative champions connectivity as the main enabler of trade growth and trade-driven prosperity. A 10% improvement in connectivity between countries along the routes will yield a 3% decrease in Chinese trade costs, which in turn will boost China’s imports and exports by about 6% and 9%, respectively, Maersk Line’s Asia representative, Tim Smith, told a gathering in July.
“It is a massive pump-priming initiative that will contribute substantially to helping shipping and transportation recover and to deal with the ongoing overcapacity issues,” he said.

The significance of the initiative has not been lost on others, with BIMCO president and Common Progress CEO Anastasios Papagiannopoulos telling Fairplay that the strategic thinking of the Chinese was impressive. “China is the only power that has a strategic plan for shipping and we need to look to China. It is a big nation, commercially minded, and one that sees the value of shipping,” he said.

There is no doubt about the potential Belt and Road holds for shipping – the countries along the Silk Road’s land and sea routes account for 63% of the world’s population and 29% of global GDP – but as with all things, there is no guarantee that the benefits will be distributed equally. Some of the 65 countries along the route stand to gain more than others and this may spur discontent.

Despite Xi’s affirmation at the May 2017 Belt and Road forum that the initiative seeks to “connect development strategies of different countries and complement each other’s advantages,” some nations fear that the program may disadvantage them, skewing their trade relationships with the world’s second-largest economy.

As Kenya’s president Uhuru Kenyatta said earlier this year, if Beijing’s “win-win strategy is going to work, it must mean that, just as Africa opens up to China, China must also open up to Africa.” How Beijing balances the ambitions of the countries along the route will be key to Belt and Road’s success.

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